Small businesses face twice the wait to get paid

SMEs in the UK are being forced to wait almost twice as long for invoices to be paid than larger companies, according to a new study.

The research, by the Asset Based Finance Association (ABFA), showed that small and medium-sized businesses faced an average wait of 67 days to be paid across 2015. This compares to an average of 38 days for larger firms.

Smaller businesses are often the least equipped to handle payment delays and could end up requiring turnaround management or even facing insolvency. Payment delays can cause severe cash-flow problems, disrupt growth and investment and have knock-on effects further down a business’ own supply chain.

Despite this, the gap in payment delays between SMEs and big business actually widened last year as large companies enjoyed a fall in their own waiting times.

Jeff Longhurst, ABFA chief executive, pointed to a change in the business culture as forming part of the problem. During the recession, he said, many businesses looked to buy themselves breathing space by extending their payment terms. As the economic landscape has normalised, longer payment terms have remained and delayed payments to suppliers is now common practice.

A new measure aimed at tackling late payment by large companies was due to come into force this month but has itself been delayed until October.

In March last year, the then Business Minister Matthew Hancock announced that big businesses would be obliged to disclose their payment terms. This was to include the average time taken to pay suppliers, the percentage of invoices paid beyond pre-agreed terms, and any late payment interest owed and paid. This information would then be displayed online, probably via a central portal.

Current Minister for Small Business Anna Soubry is now responsible for the scheme. She told The Mail On Sunday that it was better to delay the project and get it right first time rather than risk falling foul of IT issues.

Ian Cass, Head of the Forum of Private Business, which has campaigned against late payments for more than a decade, said he was disappointed by the delay but pleased that the new rules would be implemented later this year.

By Phil Smith

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